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Biofuel Economics: The Importance of Carbon and Greenhouse Gas Emissions in New Biofuel Legislation

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Cole Gustafson, NDSU Biofuels Economist Cole Gustafson, NDSU Biofuels Economist
Carbon Footprints Carbon Footprints
It is quite possible that future prices of ethanol will vary, depending on the fuel source used to heat the ethanol plant.

By Cole Gustafson, Biofuels Economist NDSU Extension Service

In general, national policymakers and the public are becoming more concerned with climate change, global warming, greenhouse gas (GHG) emissions and the carbon footprint of our human activities. These considerations were central to the development of the 2007 Energy Independence and Security Act that provides a guidepost to further the development of biofuel industries in the U.S.

Each new category of biofuel contained in the legislation is defined on the basis of how much that type of fuel reduces GHG emissions. For example, advanced biofuels are those fuels that reduce GHG emisions by up to 50 percent. Cellulosic biofuels reduce GHG emissions by more than 60 percent. Conventional biofuel, which consists of traditional corn starch-based ethanol, must reduce GHG emissions by more than 20 percent. This is a new requirement that implies that new corn ethanol plants must meet this criteria to be eligible for future blender tax credits of 45 cents a gallon.

The graphic compares the carbon footprint of available transportation fuels. The top bar represents the carbon footprint of gasoline. The next bar represents the carbon footprint of ethanol when coal is used as the heat source in the ethanol plant. The third bar represents the carbon footprint of raising corn, which is the same for each of the next three alternatives. The front portion of the second bar represents the carbon footprint of the ethanol process, again when coal is used to heat the plant. Notice only a slight reduction when compared with gasoline.

When natural gas is used to heat the plant instead of coal, the carbon footprint is reduced as shown in the third bar. The footprint becomes even smaller when distillers grains are sold wet (fourth bar) or part of the corn plant (stover or cobs) is used to heat the plant in place of natural gas (fifth bar from the top).

However, the big winner is switchgrass because it has the smallest carbon footprint. This means that people and policymakers who are concerned about climate change and GHG emissions strongly favor the growth of the cellulosic ethanol industry. Recall in my earlier article on energy independence that the fuel with the highest energy balance and greatest potential to reduce dependence on oil imports also was cellulosic ethanol. Therefore, this broad coalition of people concerned about GHG emissions and those concerned about reliance on imported oil, strongly support the growth of cellulosic ethanol.

In addition to federal policy, several states are placing more emphasis on carbon and GHG emissions. Last year, California passed legislation that reduces the carbon intensity of all transportation fuels by 10 percent by 2012. Last June, Florida passed similar legislation and Massachusetts passed it in July.

Both laws will have a significant impact on ethanol produced in the northern Plains, which traditionally remains competitive because of low-cost coal heat. However, coal-based ethanol only provides modest help to California and Florida in meeting the goals of their new legislation. Other types of ethanol with a smaller carbon footprint will command a premium because refiners will be required to purchase those fuels to meet the state mandates. What is more likely, the price of coal-based ethanol will drop to remain competitive.

How about ethanol that is produced from a coal plant’s waste heat? Ethanol produced from residual heat that is captured from another manufacturing process would have a very low carbon footprint unless the firm elects to apportion part of the plant’s heat source to its main production activity and another part to the recycling operation. In doing so, the carbon footprint of the main product improves at the expense of ethanol’s footprint.

It is quite possible that future prices of ethanol will vary, depending on the fuel source used to heat the ethanol plant. Just like current prices for regular, midgrade and premium gasoline, ethanol prices will be the lowest for those biofuels with the largest carbon footprint and the highest for those providing the greatest reduction in GHG emissions, such as cellulosic ethanol.


NDSU Agriculture Communication

Source:Cole Gustafson, (701) 231-7096, cole.gustafson@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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